ARTICLES

Lewis

Lewis (LEW) is a retailer of furniture and electrical appliances operating through 779 stores under the Lewis (494 stores), Beares (119 stores), Best Home (133 stores), and most recently, United Furniture Outlets (33 stores) brands. Of these stores, 116 are in neighbouring countries. The company does 65,7% of its business on credit and offers customers credit insurance and other financial products. In the middle of 2015, the company's insurance business and credit business came under scrutiny and it was forced to repay customers for what were considered to be illegal insurance and other fees. This had a significant impact on the company's share price which fell from around R100 to as low as R25.

Consider the chart:

Lewis (LEW) March 2015 to January 2019 - Chart by ShareFriend Pro

In its results for the six months to 30th September 2018, the company reported headline earnings per share (HEPS) up 10,7% off a 25,9% increase in turnover. The company's balance sheet is ungeared and the business is strongly cash-generative. During the six months, the company bought back 1,7m of its own shares at an average cost of R29,41 per share. In the third quarter (the December 2018 quarter) the company saw merchandise sales up 22,8% while other income (finance charges, initiation fees, insurance fees) was more or less flat. Group turnover increased by 13,2%. At current levels, the share is trading on a P:E of 10 and a dividend yield (DY) of 5%. We believe that this share represents a bargain at current levels - especially if the South African economy is expected to improve over the next few years. Lewis will benefit from any increase in consumer spending. It is an extremely tightly-managed company which has no debt and a huge store footprint. It is growing both organically and by acquisition. Obviously, as a retailer of furniture and white goods it is vulnerable to any economic downturn, but we see it as cheap right now and expect its share to rise as the economy improves.

DISCLAIMER

All information and data contained within the PDSnet Articles is for informational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet Articles are based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any comment or opinion for any reason.

PDSNET ARTICLES

Transaction Capitals Trendline

In last week’s article on Grand Parade, we drew your attention to the importance and usefulness of downward trendlines (drawn above a downward trend) in establishing the best point to buy a share. This week we draw your attention to the benefit of upward trendlines (drawn below a rising trend) as a method of determining when a share, with a strong rising trend, has corrected

Grand Parade Trendlines

Technical analysis, which is the search for and analysis of patterns in share price charts, can become very complex and mathematical. Literally thousands of line indicators have been developed which claim to improve the investor’s probability of being right when determining the moment when a share’s price turns. In our experience, the

Private Investor Advantage

Finding winning shares is not just about looking for quality. It is about finding quality when it is cheap – which usually means finding it when it has fallen heavily and is out of favour with institutional fund managers. We advise you to look for the “mountain behind you” in the chart.

As a private investor

The Confidential Report - November 2021

America

The S&P500 closed last week on another all-time record high at 4605 which means that the mini-correction of September/October is behind us and investors are now anticipating a Christmas rally. Consider the chart:

New Record High

As we predicted, the S&P500 reached a new all-time record high on Thursday 21^st October 2021 at 4549.78. This officially means that the correction that it was going through is over. That correction took the index down to a closing low of 4300.46 (on 4th October 2021) – which is a 5,2% decline from the cycle high of 4536.95

Hulamin - Insider Trading

In our opinion on Hulamin, last updated on 3^rd September 2021, we noted “What is noteworthy about this share is that it has a net asset value (NAV) which is more than 3 times its current share price making it a possible takeover target”.

On Thursday last week the company issued a bland “cautionary” notice

Calgro-M3

Calgro used to be the darling of the institutional investors. Every fund manager in South Africa was buying the share and it rose dramatically from as little at 50c in February 2011 to an intraday high of 2275c on 11^th August 2015. At this point it had a market capitalisation of R2,8bn and was trading on a price:earnings (P:E) ratio of

The Confidential Report - October 2021

America

The S&P500 is in a correction which began after 2^nd September 2021 when it made an all-time record high of 4537. Since then, it has fallen by as much as 249 points to an intra-day low of 4288 on Friday (1/10/21). This correction has taken 20 trading days and amounted to 5,4% at its worst. There are a variety

Context

The context within which a chart is viewed is vital to your understanding of it. In this article we will attempt to show the broader context within which we view the market action which took place last Friday.

INTRADAY

Let us focus our attention on the S&P500 index, which is a weighted average of the

Human Behaviour

Investing in shares is about predicting the future. When buying a share the buyer is saying that he expects its price to rise, while the seller, by his sale, clearly has the expectation that it will fall. Of course, only one of them can be right and whomever is right will take money away from whomever is wrong. And the outcome depends entirely on the accuracy of their predictions